Is 2017 a Turning Point for LNG Bunkering?

There has been a blizzard of LNG bunkering developments in 2017, and none more notable than the announcement earlier this month by CMA CGM. The French liner operator specified dual-fuel engines for nine new 22,000 TEU container ships, the largest such vessels ever ordered.

Each of the breakthrough ships will be powered by a pair of the largest gas-burning engines ever built and boast an 18,600 m3 LNG membrane bunker tank. This tank is five times larger than any specified for a previously contracted LNG-powered ship and marks the first use of a non-Type C containment system in LNG bunkering.

LNG bunkering news in 2017 has featured the appearance of the first purpose-built LNG bunker vessels and significant infrastructure investments, including by several energy majors and key regional government and port authorities, in addition to newbuilding orders for some of the largest-ever gas-fuelled ships.

Shell to the fore

Shell, already the leading global player in LNG production and shipping, is also the top gas company supporting LNG bunkering. In August, the energy major took delivery of the 6,500 m3 Cardissa, an LNG bunker tanker that is being operated from its base in Rotterdam.

Cardissa enables ship fuelling by means of ship-to-ship (STS) transfers, a much quicker and more efficient operation than jettyside truck-to-ship (TTS) bunkerings. Shell’s Rotterdam LNG STS customers confirmed so far include Containerships, cruise shipowner Carnival, dredger owner Van der Kamp, the Aframax newbuildings on order to Russian shipowner Sovcomflot and a new transatlantic car carrier pair that Siem is about to order, for charter to Volkswagen.

Carnival has seven 180,000 GT, gas-powered cruise ships on order and, to date, Shell has secured contracts to bunker four of them. One will be fuelled in Rotterdam, one at a western Mediterranean port and the remaining two at a US southeastern coast location.

Shell will charter a 4,000 m3 LNG tanker recently ordered at the VT Halter Marine yard in Mississippi for its North American bunkering operations. Designed as an articulated tug barge (ATB), the bunker vessel is set for completion in Q1 2020. Several new LNG production facilities poised to come onstream in Georgia and Florida will enhance fuel availability.

Siem is likely to be another customer of the ATB, as at least one of its new car carrier pair is set to fuel in the US. Each Siem car carrier will be provided with a 3,000 m3 IMO Type C bunker tank while each Carnival cruise ship will have a 3,600 m3 tank of the same design. Full tanks will enable 14 days of gas-only operation for all the ships.

Earlier this month Shell and Anthony Veder agreed to co-operate on the conversion of the Dutch shipowner’s 7,500 m3 coastal LNG carrier Coral Methane into a bunker vessel. Coral Methane could be utilised in Carnival’s Mediterranean cruise ship bunkering routine as the converted bunker tanker is earmarked for operations in this area as well as the southern part of the North Sea.

Shell has also been in the news in recent months in connection with LNG bunkering in Singapore and on Europe’s inland waterways. Singapore’s Maritime and Port Authority (MPA) is implementing measures to ensure that LNG fuelling is one of the services available from what is already the world’s busiest bunker port.

FueLNG, a Shell/Keppel joint venture, is one of two companies approved for LNG bunkering operations in Singapore and recently carried out the port’s first internal movements of the cryogenic liquid. Between July and September 2017 FueLNG carried out a series of TTS transfers of LNG to Golar’s Hilli Episeyo as part of a programme to test the converted floating production vessel’s gas-handling systems prior to entry into service.

FueLNG has also secured contracts from Keppel Smit Towage and Maju Maritime to provide LNG bunkers for two dual-fuel LNG tug newbuildings that will be employed in Singapore harbour. The service will commence in 2018 when the tugs are commissioned.

Rotterdam is also the focal point for Shell’s ambitions in the bunkering of European gas-powered inland waterway vessels. In August 2017 the company agreed to long-term charter a 3,000 m3 LNG bunker barge with four Type C tanks that a Victrol/CFT joint venture will build for the purpose and base in the port.

A potential customer of the bunker barge is Antwerp-based Plouvier Transport, namely its 15 110 m inland waterway tankers currently under construction for charter to Shell. The owner also has the option of fuelling the vessels at the breakbulk jetty of Rotterdam’s Gate terminal. Rotterdam has been offering a 10% discount on gross port fees to vessels that bunker on LNG since December 2015.

Tanker time

Shell’s LNG bunker customer Sovcomflot highlights the growing attractiveness of gas fuel for operators of larger, deepsea tankers. Until recent months the biggest tank vessels for which dual-fuel had been specified were intermediate-size ships of up to 25,000 DWT used on local and regional Baltic and North Sea trade routes.

In March 2017, Sovcomflot specified low-speed, dual-fuel engines for four Aframax crude/product tankers ordered at Hyundai Samho. AET, part of the MISC group, followed suit a few weeks later, contracting four LNG-powered Aframaxes at Samsung. Two of these will go on charter to Statoil and be employed in the North and Barents Seas.

Statoil will also charter two LNG-fuelled 154,000 DWT Suezmax shuttle tankers that Teekay ordered in August 2017 at Samsung. Gas4Sea has been contracted to fuel the pair using Engie Zeebrugge, its Zeebrugge-based 5,000 m3 LNG bunker vessel that was delivered in April 2017.

Rosneft of Russia is the latest owner to specify LNG fuel for its large tankers, ordering five dual-fuel Aframax tankers of 114,000 DWT that the Zvezda yard will build with technical assistance from Hyundai. Each of the gas-powered Aframax and Suezmax tankers will be provided with a pair of deck-mounted Type C bunker tanks.

LNG has also come onto the radar as a propulsion fuel for larger bulk carriers. ESL Shipping will soon take delivery of Viikki and Haaga, a pair of 26,000 DWT LNG-powered bulkers that will operate in the Baltic and be bunkered by Skangas. In Korea, Hyundai Mipo is poised to complete a 50,000 DWT LNG-fuelled bulk carrier for Ilshin Shipping to transport limestone domestically.

Polaris Shipping is set to move the bar higher. In October 2017 the Greek owner confirmed orders for 10 LNG-ready very large ore carriers (VLOCs) of 325,000 DWT at Hyundai Ulsan. Although the propulsion arrangement is yet to be specified, the bunker tank capacity for such vessels will need to be on the high side.

Skangas, the LNG supplier for the ESL bulkers, has itself taken delivery of a purpose-built LNG bunker vessel this summer. Chartered from a Veder/Sirius Shipping joint venture, the 5,800 m3 Coralius is opening up new STS bunkering opportunities for Skangas, including at-sea transfers.

Earlier this month, Skangas signed a memorandum of understanding with Titan LNG covering co-operation in the provision of LNG to customers in the North and Baltic Seas. Titan will introduce its first LNG bunker vessel, the FlexFueler1 pontoon, in mid-2018 to enable the delivery of LNG fuel to vessels throughout the Amsterdam, Rotterdam and Antwerp region.

Future proof

While LNG fuel is unlikely to be anywhere near as popular as low-sulphur distillate oils and exhaust scrubbers as a means of meeting IMO’s tightening regime governing ship atmospheric emissions, it still has a bright future.

Even if LNG wins only 5% of the marine fuel market, that means that 2,750 vessels out of a global fleet of some 55,000 ships of 500 GT and above will be running on the fuel six or seven years from now.

As indicated by the events of 2017, significant investments in LNG bunkering infrastructure are being made to enable realisation of the environmental and operating cost benefits of using clean-burning natural gas as marine fuel. And, as industry is set to build on this turning point year, the best is yet to come.

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